Memo To Republican Congressmen: Handle the tax issue yourselves. Here are some thoughts. Let the Bush tax rates expire. But, start in the House with a new GOP plan.
- Retroactive to January 1, 2011 the 2010 rates on income and capital gains continue until a future congress changes them,
- Eliminate the taxes on estates under $20 million.
- Take the advice of Obama's Deficit-Commission and lower corporate income taxes to between 23% and 29%
- Implement a 5% tax on repatriated corporate profits. In a Wall Street Journal op-ed piece Cisco's John Chambers estimates this would entice about a trillion dollars to flow into the US economy and generate $50 billion for the treasury.
The U.S. government's treatment of repatriated foreign earnings stands in marked contrast to the tax practices of almost every major developed economy, including Germany, Japan, the United Kingdom, France, Spain, Italy, Russia, Australia and Canada, to name a few. Companies headquartered in any of these countries can repatriate foreign earnings to their home countries at a tax rate of 0%-2%. That's because those countries realize that choking off foreign capital from their economies is decidedly against their national interests.
Send that bill to the Senate, with the proviso of a separate bill on unemployment benefits.
- Use the $50 billion generated above plus unspent TARP funds to extend unemployment benefits for 24 additional months. But, in 12 months benefits would phase down by 1/12 each month until they expire. This would force Senate democrats to agree to tax cuts to maintain unemployment benefits. It also makes the plan nearly veto-proof.
Mr. Obama knows that he's been dealt a weak hand. A new Republican House can show genuine leadership. Pass good laws-then dare Senate Democrats to block them. How many of them, facing re-election in 2012, want to go on record as opposing a tax cut? Nor do they want to appear to have bungled away an extension of unemployment benefits. The Boehner/McConnell strategy of trading unemployment benefits for tax cuts as a lot of mileage left. And President Obama would certainly rather work with the lame duck democrats than the Tea Party conservatives; hence his new found urgency on matters taxing.